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                                  AMENDMENT
                                AGREEMENT NO. 1

          AMENDMENT AGREEMENT, dated as of June 9, 1998 (this "AMENDMENT"), 
to (i) the RECEIVABLES FUNDING AND SERVICING AGREEMENT (the "RECEIVABLES 
AGREEMENT"), dated as of October 17, 1997, among Arcadia Receivables Finance 
Corp. III, a Delaware corporation (the "BORROWER"), Arcadia Financial Ltd., a 
Minnesota corporation, as servicer and custodian ("ARCADIA"); DLJ Mortgage 
Capital, Inc., a Delaware corporation, as agent and a lender ("DLJ"), and 
Norwest Bank Minnesota, National Association, a national banking association, 
as backup servicer and collateral agent ("NORWEST"), (ii) that certain 
COLLATERAL AGENT AGREEMENT (the "COLLATERAL AGENT AGREEMENT"), dated as of 
October 17, 1997, among DLJ, Norwest, Arcadia and the Borrower; and (iii) 
that certain FEE LETTER (the "FEE LETTER" and together with the Receivables 
Agreement and the Collateral Agent Agreement, the "AGREEMENTS"), dated as of 
October 17, 1997 among the Borrower, Arcadia, DLJ and Norwest.  Capitalized 
terms not otherwise defined herein shall have the meanings attributed to them 
in the Agreement.

          WHEREAS, each of the Borrower, Arcadia, DLJ and Norwest desire to 
amend the Agreements;

          NOW THEREFORE, the parties hereto agree as follows:

          SECTION 1.     AMENDMENT TO RECEIVABLES AGREEMENT.  (a) The term 
"Borrowing Base" in Section 1.1 of the Receivables Agreement is hereby 
amended by deleting the parenthetical appearing in clause (b)(ii)(y) thereof 
and replacing such parenthetical with the following:

               "(excluding any Pledged Receivables with respect to which an   
   amount not greater than $10 is 60 days past due)."

          (b)  The term "Eligible Account" in Section 1.1 of the Receivables 
Agreement is hereby deleted in its entirety and replaced with the following:

               ""ELIGIBLE ACCOUNT" means (a) a segregated trust account
     established in the corporate trust department or (b) a segregated direct
     deposit account, in each case maintained with a depository institution or
     trust company organized under the laws of the United States of America, or
     any of the States thereof, or the District of Columbia, having a
     certificate of deposit, short term deposit or commercial paper rating of at
     least A-1+ by Standard & Poor's and P-1 by Moody's.  In either case, such
     depository institution or trust company shall either (x) be Norwest or (y)
     have been approved by the Agent, acting in its discretion, by written
     notice to the Collateral Agent provided such depository institution meets
     the requirements set forth in the preceding sentence."

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          (c)  The term "Eligible Receivable" in Section 1.1 of the 
Receivables Agreement is hereby amended by adding the words "or Defaulted 
Receivable" after the words Delinquent Receivable in clause (z) thereof.

          (d)  The term "INTEREST PERIOD" in Section 1.1 of the Receivables 
Agreement is hereby deleted and replaced in its entirety with the following: 

               ""INTEREST PERIOD" means, with respect to an Advance, the period
     commencing on the day following the last day of the preceding Interest
     Period (or the day commencing on the Advance Date, in the case of the first
     Interest Period) and ending on the 30th day following such day; PROVIDED,
     HOWEVER, upon the occurrence of the Facility Termination Date, the Interest
     Period in respect of each outstanding Advance shall end on the day such
     Advance is paid in full.  Notwithstanding the foregoing, if any Interest
     Period begins during the 30-day period preceding the date for which the
     Borrower has notified the Agent that a Take-Out Securitization is scheduled
     to occur, such Interest Period for such Advance shall be the period
     commencing on the date of the related Advance or the day following the last
     day of the preceding Interest Period for the related Advance and ending on
     the scheduled date of the scheduled Take-Out Securitization; PROVIDED,
     HOWEVER, that if the Take-Out Securitization does not take place on the
     scheduled date therefor, a new Interest Period shall commence on such date
     and end on the earlier of (x) the new scheduled date for such Take-Out
     Securitization as notified to the Agent in writing by the Borrower and (y)
     the date which is 30 days after such date."

          (e)  The terms "Net Pledged Receivable Losses" and "Portfolio Net 
Losses" in Section 1.1 of the Receivables Agreement are hereby amended by 
adding the following phrase at the end of each such term:

               "(without reference to any of the specific numerical information
     contained in such calculations), which calculation shall be made using the
     actual numerical information with respect to the relevant Settlement
     Period."

          (f)  The term "Spread Percentage" in Section 1.1 of the Receivables 
Agreement is hereby deleted and replaced in its entirety with the following:

               ""SPREAD PERCENTAGE" means with respect to any Determination Date
     and any Settlement Period immediately preceding such date during which
     Advances were outstanding, (a) the weighted average Annual Percentage Rate
     of the Pledged Receivables as of the last day of such Settlement Period
     MINUS (b) the sum of (i) the product, expressed as a percentage, of (A) a
     fraction, the numerator of which is the Distributable Excess Spread Amount
     for such Determination Date and the denominator of which is the weighted
     average Aggregate Outstanding Principal Balance of the Pledged Receivables
     during such Settlement Period and (B) a fraction, the numerator of which is
     the number of days in the year and the denominator of which is the number
     of days in such preceding 

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     Settlement Period and (ii) 1.00%."

          (g)  Section 9.4 of the Receivables Agreement is hereby amended by 
adding the following paragraph (f) to such Section:

               "(f) Each Pledged Receivable shall be stamped on both the first
     page and the signature page (if different) in a manner satisfactory to the
     Agent to evidence the interests of the Collateral Agent therein and the
     assignment and security interest granted by Section 9.1."

          (h)  Section 11.7 of the Receivables Agreement is hereby amended by 
adding the following after clause (iv) in the second paragraph thereof:

               "and (v) the stamp required by subsection 9.4(f)."

          (i)  The following Section 11.8 is added following Section 11.7:

               "SECTION 11.8.  INDEBTEDNESS.  The Borrower shall not incur any
     Indebtedness except as contemplated by the Transaction Documents."

          (j)  Section 12.4 of the Receivables Agreement is hereby amended by 
adding the following at the end of the paragraph thereof:

               "In the event the Backup Servicer is the Servicer, the Backup 
Servicer shall only be entitled to the Servicing Fee, and if agreed upon in 
the manner set forth in Section 13.3(c), the fee so designated within Section 
13.3(c), any costs and expenses of any sub-servicer shall solely be the 
obligations of the Servicer and not of the Borrower."

          (k)  Section 14.2 of the Receivables Agreement is hereby amended by 
adding the following at the end of paragraph (a) thereof:

               "The Custodian will hold the Receivable Files (other than Lien
     Certificates) in such office on behalf of the Agent, clearly segregated
     from any other instruments and files on its records, including other
     instruments and files held by the Custodian with respect to trusts
     established by Arcadia."

          (l)  Section 15.1 of the Receivables Agreement is hereby amended by:

               (i)       deleting the period appearing at the end of paragraph
     (o) thereof and adding a semicolon in place thereof followed by the word
     "or"; and

               (ii)      adding the following after such paragraph:

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                    "(p) On any date, the amount on deposit in the Reserve
          Account shall have been less than an amount equal to the product of 1%
          and the aggregate principal amount of all outstanding Advances for one
          Business Day."

          SECTION 4.     AMENDMENT TO COLLATERAL AGENT AGREEMENT.  (a) 
Section 4 of the Collateral Agent Agreement is hereby amended by adding the 
phrase ", within 10 days," after the word "shall" in paragraph (d) of such 
Section the first time such word appears in such Section.

          (b)  Section 19 of the Collateral Agent Agreement is hereby amended 
by changing the references to "clause (y) and (z)" in paragraph (d) of such 
Section to references to "clause (ii) and (iii)."

          SECTION 5.     AMENDMENT TO FEE LETTER.  The Fee Letter is hereby 
amended by deleting paragraph 2 thereof in its entirety.

          SECTION 6.     REFERENCE TO AND EFFECT ON THE DOCUMENTS.  

          (a)  On and after the date hereof, (i) each reference in the 
Agreements to an Agreement shall refer to such Agreement as amended hereby 
and each reference in the Agreements to "hereunder", "hereof", "herein", or 
words of like import shall mean and be a reference to such Agreement as 
amended hereby.

          (b)  Except as specifically amended above, the Agreements shall 
remain in full force and effect and is hereby ratified and confirmed.

          SECTION 7.     REPRESENTATIONS AND WARRANTIES.  Each of the parties 
hereto represents and warrants that all of their representations and 
warranties contained in the Transaction Documents are true and correct in all 
material respects on the date hereof and with the same force and effect as 
though such representations and warranties had been made on the date hereof, 
except to the extent any such representations and warranties relate solely to 
an earlier date.

          SECTION 8.     GOVERNING LAW.  THIS AMENDMENT AGREEMENT SHALL BE 
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE SUBSTANTIVE LAWS OF THE 
STATE OF NEW YORK.

          SECTION 9.     EXECUTION IN COUNTERPARTS.  This Amendment may be 
executed in any number of counterparts and by different parties hereto in 
separate counterparts, each of which when so executed shall be deemed an 
original and all of which when taken together shall constitute one and the 
same agreement.  Delivery of an executed counterpart of a signature page to 
this Amendment by telecopier shall be effective as delivery of a manually 
executed counterpart of this Amendment.

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          IN WITNESS WHEREOF, the parties hereto have caused this Amendment 
to be executed by their respective officers thereunto duly authorized, as of 
the date first above written.

                         ARCADIA RECEIVABLES FINANCE CORP. III


                           By:
                              -----------------------------------------
                              Name:     
                              Title: 


                           ARCADIA FINANCIAL LTD.


                           By:
                              -----------------------------------------
                              Name:
                              Title: 


                           DLJ MORTGAGE CAPITAL, INC., as Agent and as a Lender


                           By:
                              -----------------------------------------
                              Name:     Dominic A. Capolongo
                              Title:    Senior Vice President


                           NORWEST BANK MINNESOTA,
                              NATIONAL ASSOCIATION, as Backup Servicer and
                              Collateral Agent


                           By:
                              -----------------------------------------
                              Name:     John Weidner
                              Title:    Account Manager